Some similarities between airdrops and hard forks have occasionally caused confusion among cryptocurrency investors. Between these two operations, there are significant differences. A blockchain splits permanently when there is a hard fork. When there is a split due to a change in the code it creates two pathways. The new blockchain is on one route, and the old blockchain is on the other.
A new cryptocurrency token is instantly getting into users’ wallets as part of an airdrop. People use an airdrop to deliver the new cryptocurrency directly to users’ wallets if a virtual currency splits into two.
Hard forks in cryptocurrencies
When the creators of a digital currency produce a second branch of that currency using the same fundamental code, that process is known as a hard fork. A hard fork typically happens after consideration and debate among the development team, a cryptocurrency’s miners, and occasionally, investing groups.
As a result, the two copies of the digital money are not precisely the same; rather, the old currency often continues to operate as usual while the new iteration adopts some new protocols and makes coding changes. Sometimes a hard fork is only an attempt to make a new version of an existing coin rather than the outcome of a conflict between developers and miners.
The most anticipated events in the bitcoin market in the past have been hard forks. For instance, when Bitcoin forked, it sparked a ton of investor speculating and discussion. The hard fork of Bitcoin Cash served as a good illustration of this behavior. Of course, as time has passed, there have been dozens of Bitcoin forks, many of which have mostly gone unnoticed.
Blockchain Technology: Airdrops of cryptocurrencies
In contrast, an airdrop is the distribution of a cryptocurrency to a specific set of investors. This may take place through transactions like ICO purchases and developer giveaways. Tokens are often distributed in airdrops to owners of pre-existing blockchains, such as Bitcoin or Ethereum.
This last distinction between an airdrop and a hard fork is what causes confusion. Every time this happens, owners of the previous digital currency are frequently granted new tokens, usually in an amount equal to what they now own.
In other instances, an airdrop occurs simply to increase awareness of a new token or coin. Owners of Bitcoin and Ethereum could be shocked to see additional currencies added to particular wallets (as many airdrops happen unannounced). Since many of these free gifts result in an excess of coins on the market, some in the community of digital currencies consider airdrops of this kind to be primarily a waste of time.
Investors who have unexpectedly received tokens for free frequently sell those tokens after receiving them. If enough people do this action, the cost of the new token will usually fall dramatically. This situation has led to the failure of some cryptocurrencies to gain traction. An airdrop in these circumstances differs from a hard fork in that it doesn’t produce two different versions of the same fundamental cryptocurrency. Instead, it results in the creation of a fresh coin, which may or may not last over time.